A shortcut in accounting is to book overhead costs based on sales volume of products rather than by activity the cost was related to. Through this, when analyzing profitability, high volume, successful products end up looking less profitable than they actually are, and low volume sellers inversely look significantly better for the profit & loss than they actually are. This then tends to cause the management of the company in question to discontinue the successful product, try to outsource the product in order to reduce overhead or increase the price in order to increase profit margin. All of these actions have the potential to kill the popularity of the product, thus forcing the accountant to again move overhead costs to the remaining top sellers, with exactly the same results for them. This is known as the “Death Spiral”. Campaign: “Curse of Strahd”, Dungeons & Dragons Music by: Metatron Omega, Flowers for Bodysnatchers & Wordclock
A shortcut in accounting is to book overhead costs based on sales volume of products rather than by activity the cost was related to. Through this, when analyzing profitability, high volume, successful products end up looking less profitable than they actually are, and low volume sellers inversely look significantly better for the profit & loss than they actually are.
This then tends to cause the management of the company in question to discontinue the successful product, try to outsource the product in order to reduce overhead or increase the price in order to increase profit margin. All of these actions have the potential to kill the popularity of the product, thus forcing the accountant to again move overhead costs to the remaining top sellers, with exactly the same results for them.
This is known as the “Death Spiral”.
Campaign: “Curse of Strahd”, Dungeons & Dragons
Music by: Metatron Omega, Flowers for Bodysnatchers & Wordclock
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